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October 2017 Stock Taking

Published on: 2017-10-08 11:26:59     130 times read    0  Comments

Bearish Sentiment


Trend Analysis
The benchmark index lost 67.87 points (or down 4.20%) to close at 1543.7 last month. The index fell below the 50-day, as well as 200-day moving average, which shows bearish sentiment in the market. However, towards the end of the month, Nepse managed to hover just above the 200-day MA, suggesting the 200-day MA could act as a support level. The average volume turnover decreased significantly to NPR 75.43 from NPR 93.59 crores the month prior. 

Resistance and Support

The benchmark index broke the previous support level of 1607 and 1545 towards the end of last month, reaching as low as 1493. Such break in support level confirms the bearish sentiment present in the market. However, towards the end of the month, Nepse witnessed a bullish surge as the index gained 3.64%. Currently, the new support and resistance level stands at 1480 and 1586 respectively. 

Nepse Trend Indicator
a. MACD
The MACD is a momentum oscillator formed by using two different types of moving averages, which provides specific buying or selling signals. When a MACD line crosses above the signal line, it is considered to be a positive sign and indicates a time to buy, and vice-versa. 

The MACD and the signal line, at the beginning of last month, stood at 1.97 and 9.17 respectively. In the course of the month, the MACD and signal line fell by 28.04 and 32.06 points to close at -26.07 and -22.89 respectively. Both the lines entering the negative territory gives a bearish sign. The coming weeks will test if the MACD line will surpass the signal line, which would give an indication of a bullish trigger. 

b. RSI
RSI is a form of leading indicator that is believed to be most effective during periods of sideways movement. Such indicators may create numerous buy and sell signals that are useful when the market is not clearly trending upwards or downwards. 

The RSI, at the beginning of last month, stood at 41.69 level. It fell as low as 19.87 level towards the end of last month. Such level indicates high selling pressure in the market. However, the RSI closed at 40.86 level at the end of the month, signifying a slowdown in the selling pressure in the market.

c. Bollinger Bands
The Bollinger Band is a technical indicator that consists of a moving average (21-day) along with two trading bands above (upper band) and below it (lower band). The bands are an indication of volatility, which are represented by calculating standard deviation. 

The benchmark index hovered close to the lower Bollinger band for majority of last month. Such indication showed the market to be in an oversold condition. However, the index bounced back up closer to the middle band, indicating a decrease in selling pressure. Last month also witnessed a rise in market volatility as a result of divergence between upper and lower bands.

Overview
The benchmark index fell by 67.87 points (or down 4.20%) to close at 1543.7 last month. The index fell below the 50-day and 200-day moving averages, indicating bearish sentiment in the market. The MACD and the signal line entering the negative territory support the bearish sentiment. However, the RSI indicator closing at 40.86 level indicates a decrease in the selling pressure in the market. The Bollinger bands show a significant rise in market volatility as a result of divergence between the upper and lower bands. The new support and resistance level now stands at 1480 and 1586 respectively. 


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